- Bases are Movements in the foreign exchange market.
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From now on, you member of global society of the financial markets! On the platform Liberty Finance it is possible to carry out operations of purchase and sale with currencies just as the investor takes shares. Now and the future of the world financial markets depends on you!
Supply and demand.
For definition in what direction the economy of the concrete country will move in the nearest future, traders resort to various types of economic indicators and data, such as gross internal product (GIP), volumes of import and export, employment rate, unemployment rate, growth percent, debt volume, and many other factors. All this together is called "bases".
the Cost of currency depends on any changes in supply and demand in the market. For example, when in the world the great demand for dollars is recorded, the dollar raises in cost. In case there is a surplus in the offer of dollars in the market, or for some reason in them there is no big need, then the dollar goes down in price.
the Price of currency pairs
Trade in world currency pairs represents a ratio of growth or falling in the price of one currency against the background of another. Each world currency has 3-alphabetic reduction where the first currency of any couple is known as basic currency (base currency). At any moment the price shows the cost of basic currency expressed in terms of the second – key currency (leading currency).
For example when the price for couple of EUR/USD is 1.4000, it means that you can exchange 1.4 US dollars for 1 euro. In case euro grows in the price, the price of vapors of EUR/USD as there is demand for US dollars for purchase of euro also increases. Happens also to euro: when euro goes down in price, couple of EUR/USD also go down in cost, owing to the fact that there is a smaller need for US dollars for purchase of euro.
the Cost of key currency is not the only factor of pricing of this or that currency pair. Any change of cost of basic currency, certainly, also affects this interrelation. Using the same example if now the US dollar goes up in price, then couple of EUR/USD will fall in price, and, therefore, the need for dollars not so of a bike for purchase of euro. Respectively, if the dollar falls in cost, then the price of vapors of EUR/USD will grow as in the world the big need for US dollars for purchase of euro is recorded.
Besides, increase or depreciation of each currency pair directly depends on the cost of its key currency. In addition to it, increase or a padaniye in the price of the same currency pair corresponds to jumps in the price of its main currency in inverse relation.Thus if the trader predicts growth of economy of the USA, and dollar cost after it, then he, most likely, will sell to
couple of EUR/USD as at such scenario it will fall in price. In case, according to the trader, there is a growth of economy of the EU and, respectively, the price for euro, in its interests there will be a purchase of couple of EUR/USD.
One more important factor which influences pricing of currency is the interest rate which the central bank of the concrete country establishes as collecting for use of its money. Interest rates constantly change therefore it is necessary to monitor their changes constantly.
For example if the U.S. Federal Reserve (widely known as FRS) lowers an interest rate, then, as a rule, the cost of US dollar will fall therefore the price for couple of EUR/USD will grow. If FRS raises rates, then the US dollar, as a rule, goes up up in price, and the cost of vapors of EUR/USD falls.
If the European Central Bank (ECB), an analog of FRS in the European Union, makes the decision on increase in an interest rate, then, as a rule, euro rises in price, and couple of EUR/USD will become cheaper. In case the ECB lowers interest rates, euro will fall in price while couple of EUR/USD will fall in cost too.the Central banks always balance with
, adapting to changes in the market. If the currency of the country rises in price, as a result, also its export rises in price, and there can be a problem of refusal of importers in favor of more available options. Besides, there are cases when decrease in interest rates is directed to priming of economy, however if rates too low, inflation can become the following succession of events. In that case for delay of growth it will be necessary to raise the stakes again.
higher interest rates, as a rule, attract more foreign investments (for this reason growth of currency of the country in most cases depends on interest rates). At the same time low interest rates stimulate crediting process within the country and, therefore, economic growth.
- Lesson 2 – Basic concepts
To go in step with the main trends in the world financial markets and to be able to do profitable business in the market, you need to know certain terms and concepts. There are several main terms which meet in trading.
At the exchange and the market of futures they are often called by a tic or point. It is the smallest unit in trading. Pip is an extreme right figure in the price offer.
Lots and leverage
Trade currencies are expressed in lots. The price of full lot is 100 thousand units of a certain currency, pass lot makes 10 thousand pieces. The average trader is not always able to afford to operate with such large sums. For this reason, brokers Liberty Finance offer services leverage (leverage) that even the trader with average balance on the account was able to afford trade in the market.
- Lesson 3 – How to place the order?
This lesson is devoted to how to place the order (order) about the conclusion of the transaction on the specified price. Before we pass to consideration of the matter, it is necessary to give definition to some terms. Bid – it is the price which the trader is ready to pay, Ask – it is the price for which the trader is ready to sell, a difference between them is called Spread.
If you consider that the price will rise, you should take a long position (long position). Otherwise it is better for you to sell currency and to take a short position (short position). Thus, the covering of certain positions to redeem currency at lower price has to be your purpose.
The most widespread, main type of the warrant is market order (market order). It is better to place this type of the warrant while you want to take a position. If the movement in the market too fast, is the serious probability that you receive your warrant at other price. Thus, the difference between the actual price and the price on which you calculated is called slippage (slippage).
If you do not want to risk and do much harm to the warrant, placement of the postponed warrant will be the best option (pending order). In that case you expect that in the market there will be certain conditions.
There are four types of the postponed orders:
- Limit order for purchase (Buy Limit) takes place when you consider that the price will grow after falling to a certain level. You can place the limit warrant for purchase when the required price is equal to the postponed order.
- Stop order for purchase (Buy Stop) will serve you in a situation if in your opinion, the price grows after increase to a certain level. This order is placed at Ask price.
- Limit order for purchase (Sell Limit) takes place if you think that the price will fall after achievement of a certain level. As a rule, the warrant will be activated when the price of Bid reaches the postponed order.
- Stop order for purchase (Sell Stop) it is useful in case, in your opinion, the price falls below a certain level. This order is placed at Bid price.
Also, there are also other types of the postponed orders. Most often traders use stop-loss order (Stop Loss). It is necessary for automatic closing of your positions and a stop of process of losses in case the price begins to move in the undesirable direction.
For example, if you took a long position, you probably place stop loss below an entrance. This step will protect you from sudden falling of the price. In case you on a short position, stop loss it is placed above an entrance.
The sliding/floating stop (trailing stop) does the system of more flexible. In case the price moves to your advantage, stop loss goes after the price.
One more widespread type of the postponed warrant is «Take profit» (Take Profit). This warrant automatically closes a position as soon as the desirable price is reached. This type of the warrant protects the trader from unpredictable movements in the market. On a long position the take-profit has to be located above, than the current price, and on short — below the current price.